2/12/2010 @ 12:15PM

SAP's Executive Exodus

LONDON — It seems the revolving door at SAP won’t stop spinning. Earlier this week the German enterprise software maker announced that its chief executive, Leo Apotheker, was stepping aside after less than a year in the position, and now two more executives are on their way out.

Chief Operating Officer Erwin Gunst is stepping down for health reasons, and the president of SAP’s Business Objects division, John Schwarz, has also resigned. Gunst’s departure is not a surprise since he had already been off work for the last six months or so because of ill health.

But Schwarz is another matter. Having been CEO of Business Objects before and after SAP’s acquisition of the business intelligence software firm for $6.8 billion in 2008, Schwarz was an obvious successor to Apotheker. The fact that Apotheker was replaced by two executives–the company returned to its dual-CEO structure following his departure–who were also younger than Schwarz, suggests he might have made the decision this week that there was suddenly little point of staying with the company.

Investors have balked at the management reshuffle, and the company’s American Depositary Receipts are down 7.3% since Monday. Schwarz’s departure may have been a good thing, though, since
SAP’s
management suite was starting to look at little top heavy: two CEOs, an ex-CEO of Business Objects and a powerful chairman.

Indeed, the real question for SAP is what kind of role Chairman Hasso Plattner will be playing. The company’s billionaire co-founder is popular among employees and well respected by management, and he seems now to be taking a tighter grip of the reins.

Earlier this week SAP announced that it was also bringing Chief Technology Officer Vishal Sikka on to its executive board–important because Sikka has a strong relationship with Plattner. That would give Plattner, who chairs the supervisory board, greater sway over the more powerful executive board (the dual-board structure is typical of German companies).

The reintroduction of a dual-CEO structure also gives Plattner more room for calling the shots. “By putting in a two-CEO model it precludes your having a powerful CEO, which makes the chairman more powerful,” said Gartner’s research director in Frankfurt, Thomas Otter.

Plattner is something of a colossus in the enterprise software industry, having co-founded SAP with four former IBM colleagues in 1972 and retired in May 2003 after 30 years as its chief executive. One has to wonder if his continued presence as chairman contributed to SAP’s recent history of messy succession planning.

It can be taken back to Henning Kagermann, the predecessor to Apotheker who was appointed as cochairman and CEO with Plattner in 1998. His role was meant to be that of interim leader, or a “bridge between generations,” said Otter. Instead Kagermann stayed for more than a decade, the first half sharing power with Plattner and then much of the remaining half as sole chief executive, until he was replaced by Apotheker in May 2009.

There was controversy in the middle of Kagermann’s lengthy tenure: Shai Agassi, the head of SAP’s research and development division who was long touted as the company’s future chief executive, left in 2007, reportedly frustrated at the slow pace of succession.

“SAP’s CEO-level succession has not been comfortable since Kagermann took over as CEO,” said Otter.

With new managers now in place, the question remains whether increasing involvement from Plattner will be good for SAP at a time when it is struggling to rebuild its reputation for customer relations following disastrous attempts to raise maintenance costs and when it needs to focus on bringing new technologies to the mass market.

“It’s a double-edged sword,” said Otter. “On the one hand, it’s great that one of the founders of the company is getting back involved, since he was one of the people that put SAP on the road to success in the first place. On the other, it’s a shame that there wasn’t anybody to pick up that mantle.”